Some of the worst market outcomes on record have followed on the heels of overbought rallies in periods when both valuations and the overall quality of market action have been unfavorable. In my view, Friday's rally on a distinctly stagflationary GDP report represented a good opportunity to do some lightening up of stock market exposure for investors who have not already done so, and would not easily tolerate a decline of 30% or so in the major indices.

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

I consider myself a careful, conservative person. in my short lifetime, I've been burned with so called investments so my attitude change towards suspicious, scared...you get the picture. It's getting difficult nowadays to just close my eyes and jump in...ok, I know some may say I lose long term, just choose balanced asset allocation, close your eyes and jump in, a bit paranoia. Lately I think getting 5.04% money market fund is not bad.

Another is currency hedging, buy into the market that is different than US dollar. Housing effect can be very bad in US, how bad it is will start show early 2007 when people realize how bad winter sale is.

This indeed will be a very good lesson to go through. I currently am researching European market.

I think thats true in some segments, but others are cheap and oversold. I wouldnt be a buyer in small caps or reits anytime soon, but...

__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.

I think thats true in some segments, but others are cheap and oversold.* I wouldnt be a buyer in small caps or reits anytime soon, but...

I think valuations look fine if earnings continue to be as strong as they have been for the last couple years.* *The problem is that earnings over the last couple years have been way over the norm, and it looks like it's about time for them to revert.* *If earnings get cut in half, then suddenly those reasonable valuations will look very unreasonable.

Consumer spending is responsible for 70% of GDP.* *Consumers are tapped out.* We've had zero or negative savings for a while now, and that is unsustainable.* *I think housing is the driving factor, and we're already starting to see the reduced wealth effect show up as reduced spending.

Consumer spending is responsible for 70% of GDP.* *Consumers are tapped out.* We've had zero or negative savings for a while now, and that is unsustainable.* *I think housing is the driving factor, and we're already starting to see the reduced wealth effect show up as reduced spending.

The over extended consumer has been the driver behind 13 of the last two recessions.

I'd tend to agree with the thesis if it hadn't been completely wrong for the past twenty or so years. Everyone says "it can't continue" but it always does. Maybe this time it will finally be different but I've stopped worrying about the U.S. consumer. Your real worry is going to be something that no one else is focusing on . . . like China imploding and taking most of the rest of the world with it. That seems more inevitable then the idea that Joe Six Pack will stop spending.

I'd tend to agree with the thesis if it hadn't been completely wrong for the past twenty or so years.* Everyone says "it can't continue" but it always does.

It turns out that while we currently have a negative savings rate, spending as a percentage of net worth has been fairly constant.* *I think this is evidence of the wealth effect.* *So, what happens when people feel less wealthy?

Check out this graph of the housing market vs consumer spending:

So, it's not a matter of "it can't continue" as much as it's just the way things have always played out.

Latest Threads

Social Knowledge Community

About Us

This community was started in 2002 as an alternative to a then fee only Motley Fool. The focus of the discussions is on topics related to early retirement and financial independence. The community is moderated to ensure a pleasant experience for our members.